"In the absence of data we
caution against looking at the Philly survey, as it is
notoriously erratic and poorly correlated with actual activity,
in our view," wrote D'Antonio in a preview of the release.

Manufacturing growth in the region continued in October,
according to firms responding to this month’s Business Outlook
Survey. The survey’s broadest indicators for general activity,
new orders, shipments, and employment were positive, signifying
growth. The survey's indicators of future activity suggest
continued optimism about growth over the next six months.

Indicators Suggest Continuing Expansion

The survey’s broadest measure of manufacturing conditions, the
diffusion index of current activity, edged down from 22.3 in
September to 19.8 this month (see Chart). The index has now been
positive for five consecutive months. The percentage of firms
reporting increased activity this month (36 percent) was greater
than the percentage reporting decreased activity (16 percent).

The demand for manufactured goods, as measured by the current new
orders index, increased 6 points, to 27.5, its highest reading
since March 2011. Shipments continued to expand: The index fell 1
point to 20.4, following a 22 point increase last month. The
diffusion indexes for inventories, delivery times, and unfilled
orders were all positive and higher than last month.

The survey’s future indicators have suggested markedly improved
optimism among the reporting manufacturers in recent months. The
future general activity index increased 3 points, from 58.2 to
60.8, exceeding its previous highs since the end of the recession
in 2009 (see Chart). Slightly over 63 percent of firms expect
increases in activity over the next six months; only 2 percent of
firms indicated that they expect decreases over the next six
months. The indexes for future new orders and shipments also
remained at relatively high levels. Over 67 percent of firms
expect increases in new orders and 57 percent of firms expect
increases in shipments over the next six months. The future
employment index fell 4 points; however, nearly 37 percent of the
firms expect to increase employment over the next six months.

For this month's special questions, manufacturers were asked
about changes in their workforce and the changing use of flexible
workers over the past year (see Special Questions). The share of
firms that increased their total workforce over the past year (51
percent) was significantly greater than those that decreased
their workforce (27 percent), reflecting a marked improvement
from when the question was asked last year. The mix of employment
has changed for many firms. For example, 76 percent of firms
indicated that they use part-time workers. Of this number, 15
percent of firms indicated that their share of the total
part-time workforce has increased over the past year, whereas 5
percent of the firms decreased their share of these workers.
Fewer firms use temporary/agency workers (65 percent) and
contract workers (39 percent) compared with part-time workers.
Among the firms that use temporary/agency and contract workers,
these workers account for nearly 10 percent of their workforce.

Summary

According to respondents to the October Business Outlook Survey,
the region’s manufacturing sector continued to grow this month.
All the broad indicators were positive, with firms reporting
improvements in new orders and hiring. Input price pressures were
slightly less widespread this month. Firms’ outlook has shown
notable improvement in recent months, with a majority of firms
now expecting to expand manufacturing activity over the next six
months and more than one-third expecting to add workers.